BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2024 | |||||||||||||||||||||||||||||||||||||
| BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |||||||||||||||||||||||||||||||||||||
| Basis of Presentation | The accompanying unaudited condensed consolidated
financial statements included in this Quarterly Report on Form 10-Q have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. However, certain
information or footnote disclosures normally included in complete financial statements prepared in accordance with U.S. GAAP have been condensed, or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission (the
“SEC”). In the opinion of the Company’s management, the unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q include all normal and recurring adjustments necessary for the fair statement of the results for
the interim periods presented. The results for the three months ended September 30, 2024 are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 2025.
The condensed consolidated financial statements as of September 30, 2024 and for the three months ended September 30, 2024 and 2023 included in this Quarterly Report on Form 10-Q are
unaudited. The balance sheet as of June 30, 2024 is derived from the audited financial statements as of that date. The accompanying statements should be read in conjunction with the audited financial statements and related notes contained in Item
8 of the Company’s Annual Report on Form 10-K (the “2024 Annual Report”) for the fiscal year ended June 30, 2024 or Fiscal 2024 filed with the SEC on April 3, 2025.
|
||||||||||||||||||||||||||||||||||||
| Principles of Consolidation |
The accompanying condensed consolidated financial statements as of September 30,
2024 and June 30, 2024 and for the three months ended September 30, 2024 and 2023, include the accounts of the Company and its wholly-owned subsidiaries charlesandcolvard.com, LLC, including its wholly-owned subsidiary, moissaniteoutlet.com, LLC,
which was formed and incorporated as of February 24, 2022; Charles & Colvard Direct, LLC; and Charles & Colvard (HK) Ltd., the Company’s Hong Kong subsidiary, which was entered into dormancy as of September 30, 2020 following its
re-activation in December 2017. Charles & Colvard (HK) Ltd. previously became dormant in the second quarter of 2009 and has had no operating activity since 2008. Charles & Colvard Direct, LLC, had no operating activity during the
three-month periods September 30, 2024 or 2023. All intercompany accounts have been eliminated.
|
||||||||||||||||||||||||||||||||||||
| Use of Estimates |
Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period. As future events and their effects cannot be fully determined with precision, actual results of operations, cash flow, and financial position could differ significantly
from estimates. The most significant estimates impacting the Company’s condensed consolidated financial statements relate to valuation and classification of inventories, accounts receivable reserves, stock-based compensation, and revenue recognition. Changes in estimates are reflected in the
condensed consolidated financial statements in the period in which the change in estimate occurs.
|
||||||||||||||||||||||||||||||||||||
| Restricted Cash |
Restricted Cash – In accordance with the terms of the Company’s cash collateralized $5.00 million credit
facility from JPMorgan Chase Bank, N.A. (“JPMorgan Chase”), which the Company entered into on July 12, 2021, as amended July 28, 2022, June 21, 2023, July 29, 2024 and amended further October 31, 2024, the Company was required to keep $5.1 million in a cash deposit account held by JPMorgan Chase. Such amount was held as security for the Company’s credit facility from JPMorgan
Chase. Accordingly, during the term of the JPMorgan Chase credit facility, the cash deposit held by JPMorgan Chase was classified as restricted cash for financial reporting purposes on the Company’s Condensed Consolidated Balance Sheets.
For additional information regarding the Company’s cash collateralized credit facility with
JPMorgan Chase, see Note 10, “Debt”.
In accordance with the terms of
the Company’s bank card/security agreement, entered into during the fiscal year ended June 30, 2024 with a third-party financial services company that offers business credit cards, the Company is required to keep cash in an account held
by the third-party totaling $250,000. Such amount is held as security for the Company’s bank card program with a credit limit
of $500,000. Accordingly, this cash deposit held by the third-party financial service company is classified as restricted
cash for financial reporting purposes on the Company’s consolidated balance sheets.
The reconciliation of cash, cash equivalents, and restricted cash, as presented
on the Condensed Consolidated Statements of Cash Flows, consist of the following as of the dates presented:
|
||||||||||||||||||||||||||||||||||||
| Recently Adopted/Issued Accounting Pronouncements |
Recently Adopted/Issued Accounting Pronouncements –
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” which expands annual and interim disclosure requirements for
reportable segments, primarily through enhanced disclosures about significant expenses. The updated standard is effective for annual periods beginning after December 15, 2024 and interim periods within fiscal years beginning after December
15, 2024. Early adoption is permitted. The Company is currently evaluating the effect of adopting this ASU.
In December 2023, the FASB issued ASU No. 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires two primary disclosure enhancements: 1) disaggregated information on a reporting entity’s
effective tax rate reconciliation and 2) information on income taxes paid. For public business entities, the new requirements will be effective for annual periods beginning after December 15, 2024. The guidance will be applied on a prospective
basis with the option to apply the standard retrospectively. Early adoption is permitted. The Company is currently evaluating the effect of adopting this ASU.
In November 2024, the FASB issued ASU No. 2024-03 “Income Statement—Reporting Comprehensive Income (Topic 220): Expense Disaggregation Disclosures,” which requires disaggregated disclosure of income statement expenses. For public business entities, the
new requirements will be effective for annual periods beginning December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the effect of adopting this
ASU.
|
||||||||||||||||||||||||||||||||||||